<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (or Date of Earliest Event Reported): September 30, 1998
SWIFT ENERGY COMPANY
(Exact name of Registrant as specified in its charter)
TEXAS 1-8754 74-2073055
(State of incorporation (Commission File Number) (IRS Employer
or organization) Identification No.)
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(281) 874-2700
(Registrant's telephone number)
<PAGE>
ITEM 7. Financial Statements and Exhibits.
Since April 21, 1998, Swift Energy Company (the "Company" or "Swift")
has had on file with the Securities and Exchange Commission a Registration
Statement on Form S-4 (Registration No. 333-50637) relating to the proposal by
the Company to purchase substantially all of the assets of 63 partnerships of
which the Company is the Managing General Partner. On October 15, 1998, the
Company announced that the proposal has been delayed.
Of the 63 partnerships, 24 are not required to file reports pursuant to
Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), however, audited financial statements for the year ended
December 31,1997 and unaudited financial statements through June 30, 1998 have
previously been filed for such partnerships under Form 8-K. Although no change
has occurred in the Company's plans to date, the unaudited financial statements
for the quarter ended September 30, 1998 for each of the 24 partnerships not
subject to the informational requirements of the Exchange Act are set forth
herein as follows:
2
<PAGE>
DOCUMENT DESCRIPTION
--------------------
1. SWIFT ENERGY INCOME PARTNERS 1988-1, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
2. SWIFT ENERGY INCOME PARTNERS 1988-2, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
3. SWIFT ENERGY INCOME PARTNERS 1988-3, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
4. SWIFT ENERGY INCOME PARTNERS 1988-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
5. SWIFT ENERGY INCOME PARTNERS 1989-1, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
6. SWIFT ENERGY INCOME PARTNERS 1989-2, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
7. SWIFT ENERGY INCOME PARTNERS 1989-3, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
8. SWIFT ENERGY INCOME PARTNERS 1989-4, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
9. SWIFT ENERGY INCOME PARTNERS 1989-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
10. SWIFT ENERGY INCOME PARTNERS 1989-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
11. SWIFT ENERGY INCOME PARTNERS 1989-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
12. SWIFT ENERGY INCOME PARTNERS 1990-1, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
3
<PAGE>
DOCUMENT DESCRIPTION
--------------------
13. SWIFT ENERGY INCOME PARTNERS 1990-2, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
14. SWIFT ENERGY INCOME PARTNERS 1990-B, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
15. SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
16. SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
17. SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
18. SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
19. SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
20. SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
21. SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
22. SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
23. SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
24. SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 09/30/98.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 74,383 $ 98,491
Oil and gas sales receivable 22,111 22,681
--------------- ---------------
Total Current Assets 96,494 121,172
--------------- ---------------
Gas Imbalance Receivable 2,000 2,221
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 1,615,305 1,614,337
Less-Accumulated depreciation, depletion
and amortization (1,475,180) (1,465,040)
--------------- ---------------
140,125 149,297
--------------- ---------------
$ 238,619 $ 272,690
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 7,727 $ 6,520
--------------- ---------------
Deferred Revenues 11,340 11,905
Limited Partners' Capital (18,643 Limited Partnership Units;
$100 per unit) 219,526 250,459
General Partners' Capital 26 3,806
--------------- ---------------
Total Partners' Capital 219,552 254,265
--------------- ---------------
$ 238,619 $ 272,690
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 7,981 $ 14,065 $ 24,512 $ 65,189
Interest income 1,007 1,256 3,376 2,217
--------------- --------------- --------------- ---------------
8,988 15,321 27,888 67,406
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 2,392 2,944 8,281 15,137
Production taxes 499 822 1,491 3,996
Depreciation, depletion
and amortization 3,286 4,268 10,140 18,785
General and administrative 3,489 3,979 11,113 11,816
--------------- --------------- --------------- ---------------
9,666 12,013 31,025 49,734
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (678) $ 3,308 $ (3,137) $ 17,672
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.04) $ .18 $ (.17) $ .95
=============== =============== ================ ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (3,137) $ 17,672
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 10,140 18,785
Change in gas imbalance receivable
and deferred revenues (344) 1,418
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 570 4,743
Increase (decrease) in accounts 1,207 (1,973)
--------------- ---------------
Net cash provided by (used in) operating activities 8,436 40,645
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (968) (130)
Proceeds from sales of oil and gas properties -- 67,686
--------------- ---------------
Net cash provided by (used in) investing activities (968) 67,556
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (31,576) (28,950)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (24,108) 79,251
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 98,491 13,905
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 74,383 $ 93,156
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-1, Ltd., a Texas limited
partnership ("the Partnership"), was formed on August 9, 1988, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 196 limited partners made total capital contributions
of $1,864,300.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $46,608 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $46,608 was
paid to Swift for services performed for the Partnership.
Effective September 14, 1988, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-1,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 45,675 $ 71,570
Oil and gas sales receivable 34,594 41,402
--------------- ---------------
Total Current Assets 80,269 112,972
--------------- ---------------
Gas Imbalance Receivable 18,753 20,611
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 1,121,802 1,108,067
Less-Accumulated depreciation, depletion
and amortization (847,820) (819,500)
--------------- ---------------
273,982 288,567
--------------- ---------------
$ 373,004 $ 422,150
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 15,806 $ 15,760
--------------- ---------------
Deferred Revenues 17,733 19,311
Limited Partners' Capital (11,914 Limited Partnership Units;
$100 per unit) 338,209 387,008
General Partners' Capital 1,256 71
--------------- ---------------
Total Partners' Capital 339,465 387,079
--------------- ---------------
$ 373,004 $ 422,150
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 21,422 $ 35,306 $ 75,772 $ 107,801
Interest income 679 826 2,370 2,599
Other 142 133 455 593
--------------- --------------- --------------- ---------------
22,243 36,265 78,597 110,993
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 8,735 9,234 25,050 30,591
Production taxes 1,016 2,096 3,975 5,385
Depreciation, depletion
and amortization 8,616 10,442 28,320 30,993
General and administrative 4,243 4,345 15,212 15,407
--------------- --------------- --------------- ---------------
22,610 26,117 72,557 82,376
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (367) $ 10,148 $ 6,040 $ 28,617
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.03) $ .85 $ .51 $ 2.40
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 6,040 $ 28,617
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 28,320 30,993
Change in gas imbalance receivable
and deferred revenues 280 2,410
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 6,808 12,783
Increase (decrease) in accounts payable 46 (4,870)
--------------- ---------------
Net cash provided by (used in) operating activities 41,494 69,933
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (13,735) (6,215)
Proceeds from sales of oil and gas properties -- 484
--------------- ---------------
Net cash provided by (used in) investing activities (13,735) (5,731)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (53,654) (82,145)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (25,895) (17,943)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 71,570 80,805
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,675 $ 62,862
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-2, Ltd., a Texas limited
partnership ("the Partnership"), was formed on October 3, 1988, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 107 limited partners made total capital contributions
of $1,191,400.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. Payout had
occurred as of December 31, 1996; therefore, for 1998 and each year
remaining in the life of the partnership, the continuing costs and
revenues will be shared 85 percent by the limited partners and 15
percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $29,410 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $29,785 was
paid to Swift for services performed for the Partnership.
Effective February 10, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-2,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 60,511 $ 100,684
Oil and gas sales receivable 50,612 61,170
--------------- ----------------
Total Current Assets 111,123 161,854
--------------- ----------------
Gas Imbalance Receivable 26,205 28,801
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,643,627 1,624,782
Less-Accumulated depreciation, depletion
and amortization (1,244,002) (1,178,436)
--------------- ----------------
399,625 446,346
--------------- ----------------
$ 536,953 $ 637,001
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 23,292 $ 22,079
--------------- ----------------
Deferred Revenues 24,800 27,007
Limited Partners' Capital (16,652 Limited Partnership Units;
$100 per unit) 488,353 587,841
General Partners' Capital 508 74
--------------- ----------------
Total Partners' Capital 488,861 587,915
--------------- ----------------
$ 536,953 $ 637,001
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 31,240 $ 51,312 $ 111,389 $ 162,019
Interest income 914 1,188 3,246 3,794
Other 241 276 860 1,223
--------------- --------------- --------------- ---------------
32,395 52,776 115,495 167,036
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 13,322 14,379 38,440 46,847
Production taxes 1,536 3,082 6,002 8,322
Depreciation, depletion
and amortization -
Normal 13,559 16,324 44,265 48,717
Additional 21,301 -- 21,301 --
General and administrative 5,853 6,496 20,720 22,069
--------------- --------------- --------------- ---------------
55,571 40,281 130,728 125,955
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (23,176) $ 12,495 $ (15,233) $ 41,081
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (1.39) $ .75 $ (.91) $ 2.47
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (15,233) $ 41,081
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 65,566 48,717
Change in gas imbalance receivable
and deferred revenues 389 3,356
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 10,558 19,755
Increase (decrease) in accounts payable 1,213 (4,529)
--------------- ---------------
Net cash provided by (used in) operating activities 62,493 108,380
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (18,845) (9,035)
Proceeds from sales of oil and gas properties -- 678
--------------- ---------------
Net cash provided by (used in) investing activities (18,845) (8,357)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (83,821) (124,772)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (40,173) (24,749)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 100,684 115,396
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 60,511 $ 90,647
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-3, Ltd., a Texas limited
partnership ("the Partnership"), was formed on January 6, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 144 limited partners made total capital contributions
of $1,665,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. Payout had
occurred as of December 31, 1996; therefore, for 1998 and each year
remaining in the life of the partnership, the continuing costs and
revenues will be shared 85 percent by the limited partners and 15
percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $41,130 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $41,630 was
paid to Swift for services performed for the Partnership.
Effective February 10, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-2,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales. applicable.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,206 $ 37,405
Oil and gas sales receivable 67,472 105,763
--------------- ---------------
Total Current Assets 68,678 143,168
--------------- ---------------
Gas Imbalance Receivable 24,459 27,280
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 4,252,299 4,222,551
Less-Accumulated depreciation, depletion
and amortization (3,468,621) (3,398,167)
--------------- ---------------
783,678 824,384
--------------- ---------------
$ 876,815 $ 994,832
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 84,614 $ 40,725
--------------- ---------------
Deferred Revenues 18,138 19,696
Limited Partners' Capital (43,610.70 Limited Partnership Units;
$100 per unit) 773,236 934,340
General Partners' Capital 827 71
--------------- ---------------
Total Partners' Capital 774,063 934,411
--------------- ---------------
$ 876,815 $ 994,832
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 60,051 $ 94,156 $ 197,917 $ 305,308
Interest income 84 394 351 1,932
Other 305 276 973 1,296
--------------- --------------- --------------- ---------------
60,440 94,826 199,241 308,536
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 23,639 23,665 66,505 79,645
Production taxes 3,066 5,854 10,613 16,532
Depreciation, depletion
and amortization 22,658 29,594 70,454 88,838
General and administrative 11,695 13,359 48,171 44,050
Interest expense 441 -- 441 --
--------------- --------------- --------------- ---------------
61,499 72,472 196,184 229,065
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (1,059) $ 22,354 $ 3,057 $ 79,471
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.02) $ .51 $ .07 $ 1.82
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 3,057 $ 79,471
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 70,454 88,838
Change in gas imbalance receivable
and deferred revenues 1,263 6,278
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 38,291 57,355
Increase (decrease) in accounts payable 43,889 (43,741)
--------------- ---------------
Net cash provided by (used in) operating activities 156,954 188,201
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (29,748) (11,410)
Proceeds from sales of oil and gas properties -- 1,711
--------------- ---------------
Net cash provided by (used in) investing activities (29,748) (9,699)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (163,405) (240,411)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (36,199) (61,909)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,405 97,575
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,206 $ 35,666
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 441 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTESS TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1988, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 400 limited partners made total capital contributions
of $4,361,070.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the six months ended June
30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $106,527 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $109,027 was
paid to Swift for services performed for the Partnership.
Effective December 31, 1988, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-C,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,294 $ 28,690
Oil and gas sales receivable 44,034 82,002
--------------- ----------------
Total Current Assets 45,328 110,692
--------------- ----------------
Gas Imbalance Receivable 9,786 10,946
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,926,876 1,893,426
Less-Accumulated depreciation, depletion
and amortization (1,471,449) (1,218,682)
--------------- ----------------
455,427 674,744
--------------- ----------------
$ 510,541 $ 796,382
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 79,288 $ 30,030
--------------- ----------------
Deferred Revenues 4,614 4,982
Limited Partners' Capital (19,083 Limited Partnership Units;
$100 per unit) 422,185 756,424
General Partners' Capital 4,454 4,946
--------------- ----------------
Total Partners' Capital 426,639 761,370
--------------- ----------------
$ 510,541 $ 796,382
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 39,778 $ 78,514 $ 147,310 $ 247,470
Interest income 17 649 116 2,041
Other 140 119 436 530
--------------- --------------- --------------- ---------------
39,935 79,282 147,862 250,041
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 14,109 19,815 47,946 63,404
Production taxes 1,877 4,471 7,293 12,513
Depreciation, depletion
and amortization -
Normal 21,304 24,904 69,576 73,887
Additional 183,191 -- 183,191 --
General and administrative 6,485 7,691 24,001 28,369
Interest expense 815 -- 839 --
--------------- --------------- --------------- ---------------
227,781 56,881 332,846 178,173
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (187,846) $ 22,401 $ (184,984) $ 71,868
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (9.84) $ 1.17 $ (9.69) $ 3.77
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (184,984) $ 71,868
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 252,767 73,887
Change in gas imbalance receivable
and deferred revenues 792 3,405
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 37,968 32,379
Increase (decrease) in accounts payable 49,258 (23,568)
--------------- ---------------
Net cash provided by (used in) operating activities 155,801 157,971
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (33,450) (13,053)
Proceeds from sales of oil and gas properties -- 1,014
(Increase) decrease in receivable due to property disposition -- 14,762
--------------- ---------------
Net cash provided by (used in) investing activities (33,450) 2,723
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (149,747) (171,413)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,396) (10,719)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,690 68,940
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,294 $ 58,221
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 839 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-1, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 181 limited partners made total capital contributions
of $1,908,300.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
have received $47,708 for managing and overseeing the offering of the
limited partnership units. A one-time management fee of $47,708 was paid
to Swift for services performed for the Partnership.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,826 $ 205,800
Oil and gas sales receivable 101,272 177,188
--------------- ----------------
Total Current Assets 103,098 382,988
--------------- ----------------
Gas Imbalance Receivable 40,214 44,416
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,793,305 3,727,132
Less-Accumulated depreciation, depletion
and amortization (2,747,289) (2,408,741)
--------------- ----------------
1,046,016 1,318,391
--------------- ----------------
$ 1,189,328 $ 1,745,795
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 57,180 $ 59,564
--------------- ----------------
Deferred Revenues 27,163 29,492
Limited Partners' Capital (36,512 Limited Partnership Units;
$100 per unit) 1,091,300 1,634,355
General Partners' Capital 13,685 22,384
--------------- ----------------
Total Partners' Capital 1,104,985 1,656,739
--------------- ----------------
$ 1,189,328 $ 1,745,795
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 81,892 $ 165,377 $ 311,077 $ 532,635
Interest income 250 2,929 2,811 9,014
Other 445 506 1,605 2,271
--------------- --------------- --------------- ---------------
82,587 168,812 315,493 543,920
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 34,520 44,001 107,428 140,607
Production taxes 4,067 9,607 16,380 28,235
Depreciation, depletion
and amortization -
Normal 38,704 51,081 131,505 152,894
Additional 207,043 -- 207,043 --
General and administrative 11,928 12,334 43,468 54,754
--------------- --------------- --------------- ---------------
296,262 117,023 505,824 376,490
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (213,675) $ 51,789 $ (190,331) $ 167,430
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (5.85) $ 1.42 $ (5.21) $ 4.59
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (190,331) $ 167,430
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 338,548 152,894
Change in gas imbalance receivable
and deferred revenues 1,873 9,152
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 75,916 76,814
Increase (decrease) in accounts payable (2,384) (50,193)
--------------- ---------------
Net cash provided by (used in) operating activities 223,622 356,097
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (66,173) (31,047)
Proceeds from sales of oil and gas properties -- 1,949
(Increase) decrease in receivable due to property disposition -- 54,292
--------------- ---------------
Net cash provided by (used in) investing activities (66,173) 25,194
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (361,423) (394,180)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (203,974) (12,889)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 205,800 248,757
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,826 $ 235,868
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-2, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 250 limited partners made total capital contributions
of $3,651,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1997, 1996, 1995 and 1994, the continuing costs and
revenues were shared 90 percent by the limited partners and 10 percent
by the general partners. Payout occurred in January, 1998; therefore,
for 1998 and each year remaining in the life of the partnership, the
continuing costs and revenues will be shared 85 percent by the limited
partners and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
have received $89,780 for managing and overseeing the offering of the
limited partnership units. A one-time management fee of $91,280 was be
paid to Swift for services performed for the Partnership.
Effective June 30, 1989, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Managed Pension Assets Partnership 1989-1, Ltd.
("Pension Partnership"), managed by Swift for the purpose of acquiring
working interests in producing oil and gas properties. Under terms of
the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months.
The Partnership's share of this cost is expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 62,107 $ 137,885
Oil and gas sales receivable 51,547 83,864
--------------- ----------------
Total Current Assets 113,654 221,749
--------------- ----------------
Gas Imbalance Receivable 17,809 18,146
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,959,421 1,948,922
Less-Accumulated depreciation, depletion
and amortization (1,670,831) (1,633,437)
--------------- ----------------
288,590 315,485
--------------- ----------------
$ 420,053 $ 555,380
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 22,407 $ 23,670
--------------- ----------------
Deferred Revenues 10,115 11,039
Limited Partners' Capital (21,812 Limited Partnership Units;
$100 per unit) 384,956 520,643
General Partners' Capital 2,575 28
--------------- ----------------
Total Partners' Capital 387,531 520,671
--------------- ----------------
$ 420,053 $ 555,380
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 25,676 $ 55,489 $ 93,864 $ 197,729
Interest income 990 2,175 4,032 5,746
Other 75 128 319 515
--------------- --------------- --------------- ---------------
26,741 57,792 98,215 203,990
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 11,053 16,823 30,192 55,979
Production taxes 1,853 3,297 5,779 9,879
Depreciation, depletion
and amortization 11,438 14,514 37,394 45,706
General and administrative 8,017 8,429 26,452 31,836
--------------- --------------- --------------- ---------------
32,361 43,063 99,817 143,400
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (5,620) $ 14,729 $ (1,602) $ 60,590
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.26) $ .68 $ (.07) $ 2.78
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (1,602) $ 60,590
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 37,394 45,706
Change in gas imbalance receivable
and deferred revenues (587) (1,744)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 32,317 96,051
Increase (decrease) in accounts payable (1,263) (63,026)
--------------- ---------------
Net cash provided by (used in) operating activities 66,259 137,577
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (10,499) (9,099)
(Increase) decrease in receivable due to property disposition -- 161,517
--------------- ---------------
Net cash provided by (used in) investing activities (10,499) 152,418
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (131,538) (221,061)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (75,778) 68,934
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 137,885 90,435
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 62,107 $ 159,369
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-3, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 160 limited partners made total capital contributions
of $2,181,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and 10 percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1998, 1997, 1996, 1995 and 1994, the continuing costs and
revenues were shared 90 percent by the limited partners and 10 percent
by the general partners. Payout occurred in July, 1998; therefore, for
the remainder of 1998 and each year remaining in the life of the
partnership, the continuing costs and revenues will be shared 85 percent
by the limited partners and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties -
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
have received $54,530 for managing and overseeing the offering of the
limited partnership units. A one-time management fee of $54,530 was paid
to Swift for services performed for the Partnership.
Effective September 30, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1989-2,
Ltd. ("Pension Partnership"), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,038 $ 1,184
Oil and gas sales receivable 47,744 56,754
--------------- ----------------
Total Current Assets 48,782 57,938
--------------- ----------------
Gas Imbalance Receivable 23,197 25,028
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,516,971 1,533,340
Less-Accumulated depreciation, depletion
and amortization (1,244,357) (1,208,865)
--------------- ----------------
272,614 324,475
--------------- ----------------
$ 344,593 $ 407,441
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 19,518 $ 23,419
--------------- ----------------
Deferred Revenues 27,891 31,275
Limited Partners' Capital (15,158 Limited Partnership Units;
$100 per unit) 291,134 342,792
General Partners' Capital 6,050 9,955
--------------- ----------------
Total Partners' Capital 297,184 352,747
--------------- ----------------
$ 344,593 $ 407,441
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 28,051 $ 40,874 $ 96,942 $ 155,506
Interest income 140 102 353 263
Other 218 448 1,102 1,872
--------------- --------------- --------------- ---------------
28,409 41,424 98,397 157,641
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 11,699 13,819 34,398 43,085
Production taxes 1,871 2,855 6,634 9,975
Depreciation, depletion
and amortization 11,552 14,436 35,492 45,872
General and administrative 5,461 6,547 18,871 19,074
Interest expense -- 17 -- 81
--------------- --------------- --------------- ---------------
30,583 37,674 95,395 118,087
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (2,174) $ 3,750 $ 3,002 $ 39,554
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.14) $ .25 $ .20 $ 2.61
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 3,002 $ 39,554
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 35,492 45,872
Change in gas imbalance receivable
and deferred revenues (1,553) (785)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 9,010 32,752
Increase (decrease) in accounts payable (3,901) (34,251)
--------------- ---------------
Net cash provided by (used in) operating activities 42,050 83,142
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (1,630) (9,830)
Proceeds from sales of oil and gas properties 17,999 3,475
--------------- ---------------
Net cash provided by (used in) investing activities 16,369 (6,355)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (58,565) (76,753)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (146) 34
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,184 1,124
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,038 $ 1,158
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 81
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-4, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 107 limited partners made total capital contributions
of $1,515,800.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and 10 percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1994, 1993 and 1992, the cash distribution rate (as defined in the
Partnership Agreement) exceeded 17.5 percent and thus, in 1995, 1994 and
1993, the continuing costs and revenues were shared 85 percent by the
limited partners and 15 percent by the general partners. During 1997,
1996 and 1995, the cash distribution rate fell below 17.5 percent and
thus, in 1998, 1997 and 1996, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
have received $37,520 for managing and overseeing the offering of the
limited partnership units. A one-time management fee of $37,895 was paid
to Swift for services performed for the Partnership.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months.
The Partnership's share of this cost is expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,549 $ 143,645
Oil and gas sales receivable 135,391 264,694
--------------- ----------------
Total Current Assets 136,940 408,339
--------------- ----------------
Gas Imbalance Receivable 44,003 48,599
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,499,386 5,402,779
Less-Accumulated depreciation, depletion
and amortization (4,058,507) (3,464,374)
--------------- ----------------
1,440,879 1,938,405
--------------- ----------------
$ 1,621,822 $ 2,395,343
============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 203,113 $ 94,176
--------------- ----------------
Deferred Revenues 29,259 31,763
Limited Partners' Capital (51,792.81 Limited Partnership Units;
$100 per unit) 1,364,693 2,245,932
General Partners' Capital 24,757 23,472
--------------- ----------------
Total Partners' Capital 1,389,450 2,269,404
--------------- ----------------
$ 1,621,822 $ 2,395,343
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 122,357 $ 246,719 $ 461,159 $ 804,904
Interest income 126 2,591 703 8,447
Other 624 840 2,482 3,631
--------------- --------------- --------------- ---------------
123,107 250,150 464,344 816,982
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 48,358 66,229 160,762 208,349
Production taxes 6,090 14,214 24,212 42,593
Depreciation, depletion
and amortization -
Normal 61,830 74,771 203,825 225,327
Additional 390,308 -- 390,308 --
General and administrative 16,914 16,719 61,540 79,162
Interest expense 1,700 -- 1,700 --
--------------- --------------- --------------- ---------------
525,200 171,933 842,347 555,431
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (402,093) $ 78,217 $ (378,003) $ 261,551
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (7.76) $ 1.51 $ (7.30) $ 5.05
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (378,003) $ 261,551
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 594,133 225,327
Change in gas imbalance receivable
and deferred revenues 2,092 10,172
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 129,303 112,105
Increase (decrease) in accounts payable 108,937 (73,042)
--------------- ---------------
Net cash provided by (used in) operating activities 456,462 536,113
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (96,607) (49,812)
Proceeds from sales of oil and gas properties -- --
(Increase) decrease in receivable due to property disposition -- 62,443
--------------- ---------------
Net cash provided by (used in) investing activities (96,607) 12,631
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (501,951) (587,843)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (142,096) (39,099)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 143,645 262,455
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,549 $ 223,356
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,700 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions. The 455 limited partners made total capital contributions
of $5,179,281.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1997, 1996, 1995 and 1994, the continuing costs and
revenues were shared 90 percent by the limited partners and 10 percent
by the general partners. Payout occurred in January, 1998; therefore,
for 1998 and each year remaining in the life of the partnership, the
continuing costs and revenues will be shared 85 percent by the limited
partners and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $128,607 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $129,482 was
paid to Swift for services performed for the Partnership.
Effective March 31, 1989, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Managed Pension Assets Partnership 1989-A, Ltd.
("Pension Partnership"), managed by Swift for the purpose of acquiring
working interests in producing oil and gas properties. Under terms of
the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 142,791 $ 302,308
Oil and gas sales receivable 96,766 136,384
--------------- ----------------
Total Current Assets 239,557 438,692
--------------- ----------------
Gas Imbalance Receivable 35,698 36,428
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,689,387 3,669,178
Less-Accumulated depreciation, depletion
and amortization (3,148,657) (3,076,893)
--------------- ----------------
540,730 592,285
--------------- ----------------
$ 815,985 $ 1,067,405
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 42,814 $ 21,111
--------------- ----------------
Deferred Revenues 20,837 22,741
Limited Partners' Capital (40,899 Limited Partnership Units;
$100 per unit) 749,241 1,023,551
General Partners' Capital 3,093 2
--------------- ----------------
Total Partners' Capital 752,334 1,023,553
--------------- ----------------
$ 815,985 $ 1,067,405
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 46,444 $ 105,749 $ 172,781 $ 377,931
Interest income 2,260 4,519 9,010 12,194
Other 184 330 822 1,357
--------------- --------------- --------------- ---------------
48,888 110,598 182,613 391,482
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 21,072 32,943 58,689 108,147
Production taxes 3,394 6,227 10,692 18,830
Depreciation, depletion
and amortization 21,685 27,614 71,764 86,881
General and administrative 15,144 16,534 49,179 61,029
--------------- --------------- --------------- ---------------
61,295 83,318 190,324 274,887
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (12,407) $ 27,280 $ (7,711) $ 116,595
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.30) $ .67 $ (.19) $ 2.85
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (7,711) $ 116,595
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 71,764 86,881
Change in gas imbalance receivable
and deferred revenues (1,174) (3,437)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 39,618 227,182
(Increase) decrease in other current assets -- (5,171)
Increase (decrease) in accounts payable 21,703 (157,333)
--------------- ---------------
Net cash provided by (used in) operating activities 124,200 264,717
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (20,209) (18,213)
Proceeds from sales of oil and gas properties -- --
(Increase) decrease in receivable due to property disposition -- 315,837
--------------- ---------------
Net cash provided by (used in) investing activities (20,209) 297,624
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (263,508) (415,820)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (159,517) 146,521
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 302,308 193,408
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 142,791 $ 339,929
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions. The 449 limited partners made total capital contributions
of $4,089,900.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1998, 1997, 1996, 1995 and 1994, the continuing costs and
revenues were shared 90 percent by the limited partners and 10 percent
by the general partners. Payout occurred in April, 1998; therefore, for
the remainder of 1998 and each year remaining in the life of the
partnership, the continuing costs and revenues will be shared 85 percent
by the limited partners and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $100,788 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $102,247 was
paid to Swift for services performed for the Partnership.
Effective September 30, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1989-C,
Ltd. ("Pension Partnership"), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months.
The Partnership's share of this cost is expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 10,082 $ 10,173
Oil and gas sales receivable 135,261 139,699
--------------- ----------------
Total Current Assets 145,343 149,872
--------------- ----------------
Gas Imbalance Receivable 63,933 68,976
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,999,588 4,027,187
Less-Accumulated depreciation, depletion
and amortization (3,279,262) (3,185,789)
--------------- ----------------
720,326 841,398
--------------- ----------------
$ 929,602 $ 1,060,246
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 52,720 $ 33,990
--------------- ----------------
Deferred Revenues 76,871 85,388
Limited Partners' Capital (39,938.01 Limited Partnership Units;
$100 per unit) 783,505 914,457
General Partners' Capital 16,506 26,411
--------------- ----------------
Total Partners' Capital 800,011 940,868
--------------- ----------------
$ 929,602 $ 1,060,246
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 77,224 $ 109,024 $ 265,366 $ 415,972
Interest income 447 253 1,244 663
Other 598 1,217 2,573 5,055
--------------- --------------- --------------- ---------------
78,269 110,494 269,183 421,690
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 32,140 36,691 94,078 114,662
Production taxes 5,122 7,606 18,251 26,812
Depreciation, depletion
and amortization 30,457 37,159 93,473 117,725
General and administrative 14,126 17,955 47,775 50,389
--------------- --------------- --------------- ---------------
81,845 99,411 253,577 309,588
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (3,576) $ 11,083 $ 15,606 $ 112,102
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.09) $ .28 $ .39 $ 2.81
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 15,606 $ 112,102
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 93,473 117,725
Change in gas imbalance receivable
and deferred revenues (3,474) (2,137)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 4,438 85,146
Increase (decrease) in accounts payable 18,730 (92,237)
--------------- ---------------
Net cash provided by (used in) operating activities 128,773 220,599
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (4,559) (27,069)
Proceeds from sales of oil and gas properties 32,158 9,479
--------------- ---------------
Net cash provided by (used in) investing activities 27,599 (17,590)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (156,463) (202,978)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (91) 31
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,173 1,015
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,082 $ 1,046
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions. The 447 limited partners made total capital contributions
of $3,993,801.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1994, 1993 and 1992, the cash distribution rate (as defined in the
Partnership Agreement) exceeded 17.5 percent and thus, in 1995, 1994 and
1993, the continuing costs and revenues were shared 85 percent by the
limited partners and 15 percent by the general partners. During 1997,
1996 and 1995, the cash distribution rate fell below 17.5 percent and
thus, in 1998, 1997 and 1996, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $99,845 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $99,845 was
paid to Swift for services performed for the Partnership.
Effective December 31, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1989-D,
Ltd. ("Pension Partnership"), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 125,864 $ 109,771
Oil and gas sales receivable 66,389 86,103
--------------- ---------------
Total Current Assets 192,253 195,874
--------------- ----------------
Gas Imbalance Receivable 54,368 59,604
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,679,075 1,732,433
Less-Accumulated depreciation, depletion
and amortization (1,423,825) (1,389,253)
--------------- ----------------
255,250 343,180
--------------- ----------------
$ 501,871 $ 598,658
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 18,726 $ 17,794
--------------- ----------------
Deferred Revenues 65,370 72,604
Limited Partners' Capital (14,767.50 Limited Partnership Units;
$100 per unit) 403,893 489,329
General Partners' Capital 13,882 18,931
--------------- ----------------
Total Partners' Capital 417,775 508,260
--------------- ----------------
$ 501,871 $ 598,658
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 35,538 $ 61,662 $ 117,416 $ 204,582
Interest income 1,962 921 5,329 2,369
Other 91 131 312 481
--------------- --------------- --------------- ---------------
37,591 62,714 123,057 207,432
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 10,513 13,343 34,572 42,531
Production taxes 2,267 4,134 7,450 12,469
Depreciation, depletion
and amortization 11,174 17,288 34,572 60,611
General and administrative 5,021 5,916 18,478 22,040
--------------- --------------- --------------- ---------------
28,975 40,681 95,072 137,651
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 8,616 $ 22,033 $ 27,985 $ 69,781
=============== =============== =============== ================
Limited Partners' net income (loss)
per unit $ .58 $ 1.49 $ 1.90 $ 4.73
=============== =============== =============== ================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 27,985 $ 69,781
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 34,572 60,611
Change in gas imbalance receivable
and deferred revenues (1,998) (366)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 19,714 6,525
Increase (decrease) in accounts payable 932 (1,738)
--------------- ---------------
Net cash provided by (used in) operating activities 81,205 134,813
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (9,468) (1,214)
Proceeds from sales of oil and gas properties 62,826 --
--------------- ---------------
Net cash provided by (used in) investing activities 53,358 (1,214)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (118,470) (115,748)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,093 17,851
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 109,771 48,238
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125,864 $ 66,089
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-1, Ltd., a Texas limited
partnership ("the Partnership"), was formed on April 17, 1990, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 140 limited partners made total capital contributions
of $1,476,650.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and 10 percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1994, 1993 and 1992, the cash distribution rate (as defined in the
Partnership Agreement) exceeded 17.5 percent and thus, in 1995, 1994 and
1993, the continuing costs and revenues were shared 85 percent by the
limited partners and 15 percent by the general partners. During 1997,
1996 and 1995, the cash distribution rate fell below 17.5 percent and
thus, in 1998, 1997 and 1996, the continuing costs and revenues were
shared 90 percent by the limited partners and 10 percent by the general
partners. Payout occurred in July, 1998; therefore, for the remainder of
1998 and each year remaining in the life of the partnership, the
continuing costs and revenues will be shared 85 percent by the limited
partners and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
have received $36,916 for managing and overseeing the offering of the
limited partnership units. A one-time management fee of $36,916 was paid
to Swift for services performed for the Partnership.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 76,325 $ 49,115
Oil and gas sales receivable 45,799 60,881
--------------- ----------------
Total Current Assets 122,124 109,996
--------------- ----------------
Gas Imbalance Receivable 35,715 39,195
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,336,530 1,381,086
Less-Accumulated depreciation, depletion
and amortization (1,159,339) (1,135,400)
--------------- ----------------
177,191 245,686
--------------- ----------------
$ 335,030 $ 394,877
================ ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 13,193 $ 12,498
--------------- ----------------
Deferred Revenues 42,942 47,748
Limited Partners' Capital (10,265 Limited Partnership Units;
$100 per unit) 270,268 321,268
General Partners' Capital 8,627 13,363
--------------- ----------------
Total Partners' Capital 278,895 334,631
--------------- ----------------
$ 335,030 $ 394,877
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 24,756 $ 44,475 $ 82,773 $ 148,363
Interest income 1,197 171 3,051 408
Other 64 91 222 348
--------------- --------------- --------------- ---------------
26,017 44,737 86,046 149,119
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 7,210 9,649 24,173 30,901
Production taxes 1,576 2,947 5,164 8,943
Depreciation, depletion
and amortization 7,758 12,680 23,939 44,922
General and administrative 3,583 4,049 13,237 15,701
--------------- --------------- --------------- ---------------
20,127 29,325 66,513 100,467
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 5,890 $ 15,412 $ 19,533 $ 48,652
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ .57 $ 1.50 $ 1.90 $ 4.74
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 19,533 $ 48,652
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 23,939 44,922
Change in gas imbalance receivable
and deferred revenues (1,326) 212
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 15,082 6,256
Increase (decrease) in accounts payable 695 (16,383)
--------------- ---------------
Net cash provided by (used in) operating activities 57,923 83,659
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (7,080) --
Proceeds from sales of oil and gas properties 51,636 1,396
--------------- ---------------
Net cash provided by (used in) investing activities 44,556 1,396
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (75,269) (70,994)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,210 14,061
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,115 1,024
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 76,325 $ 15,085
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-2, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1990, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 78 limited partners made total capital contributions
of $1,026,500.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and 10 percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1993 and 1992, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1994 and 1993, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996, 1995
and 1994, the cash distribution rate fell below 17.5 percent and thus,
in 1998, 1997, 1996 and 1995, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $25,662 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $25,662 was paid to
Swift for services performed for the Partnership.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 224,772 $ 132,431
Oil and gas sales receivable 147,693 207,126
Other 8,926 --
--------------- ----------------
Total Current Assets 381,391 339,557
--------------- ----------------
Gas Imbalance Receivable 123,022 134,839
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,548,981 4,696,100
Less-Accumulated depreciation, depletion
and amortization (3,933,194) (3,850,287)
--------------- ----------------
615,787 845,813
--------------- ----------------
$ 1,120,200 $ 1,320,209
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 44,582 $ 42,691
--------------- ----------------
Deferred Revenues 147,918 164,245
Limited Partners' Capital (34,642.06 Limited Partnership Units;
$100 per unit) 897,242 1,066,971
General Partners' Capital 30,458 46,302
--------------- ----------------
Total Partners' Capital 927,700 1,113,273
--------------- ----------------
$ 1,120,200 $ 1,320,209
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 85,271 $ 151,870 $ 285,012 $ 506,845
Interest income 3,602 481 8,823 1,261
Other 222 312 763 1,181
--------------- --------------- --------------- ---------------
89,095 152,663 294,598 509,287
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 24,819 32,790 83,000 105,147
Production taxes 5,400 10,092 17,763 30,594
Depreciation, depletion
and amortization 26,841 43,297 82,907 152,366
General and administrative 11,574 13,612 41,885 51,064
--------------- --------------- --------------- ---------------
68,634 99,791 225,555 339,171
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 20,461 $ 52,872 $ 69,043 $ 170,116
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ .59 $ 1.53 $ 1.99 $ 4.91
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 69,043 $ 170,116
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 82,907 152,366
Change in gas imbalance receivable
and deferred revenues (4,510) 727
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 59,433 22,197
(Increase) decrease in other current assets (8,926) --
Increase (decrease) in accounts payable 1,891 (92,137)
--------------- ---------------
Net cash provided by (used in) operating activities 199,838 253,269
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (24,390) --
Proceeds from sales of oil and gas properties 171,509 4,781
--------------- ---------------
Net cash provided by (used in) investing activities 147,119 4,781
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (254,616) (240,339)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 92,341 17,711
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 132,431 1,447
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 224,772 $ 19,158
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-B, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1990, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions. The 375 limited partners made total capital contributions
of $3,464,206.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1993 and 1992, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1994 and 1993, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996, 1995
and 1994, the cash distribution rate fell below 17.5 percent and thus,
in 1998, 1997, 1996 and 1995, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $86,605 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $86,605 was
paid to Swift for services performed for the Partnership.
Effective June 30, 1990, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Managed Pension Assets Partnership 1990-B, Ltd.
("Pension Partnership"), managed by Swift for the purpose of acquiring
working interests in producing oil and gas properties. Under terms of
the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to its proportionate share of the property acquisition
costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,701 $ 1,649
Oil and gas sales receivable 96,029 176,351
--------------- ----------------
Total Current Assets 97,730 178,000
--------------- ----------------
Gas Imbalance Receivable 73,144 79,419
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,050,492 5,109,574
Less-Accumulated depreciation, depletion
and amortization (3,984,863) (3,530,952)
--------------- ----------------
1,065,629 1,578,622
--------------- ----------------
$ 1,236,503 $ 1,836,041
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 71,345 $ 69,828
--------------- ----------------
Deferred Revenues 89,142 100,767
Interest Holders' Capital (4,453,469 Interest Holders' SDIs;
$1.00 per SDI) 1,033,415 1,604,364
General Partners' Capital 42,601 61,082
--------------- ----------------
Total Partners' Capital 1,076,016 1,665,446
--------------- ----------------
$ 1,236,503 $ 1,836,041
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 81,969 $ 166,693 $ 315,720 $ 590,527
Interest income 347 296 983 773
Other -- 505 911 2,208
--------------- --------------- --------------- ---------------
82,316 167,494 317,614 593,508
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 45,533 53,124 131,918 175,806
Production taxes 4,981 10,391 17,641 33,872
Depreciation, depletion
and amortization -
Normal 39,977 47,447 126,957 174,961
Additional 326,954 -- 326,954 --
General and administrative 13,796 17,665 51,825 66,529
--------------- --------------- --------------- ---------------
431,241 128,627 655,295 451,168
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (348,925) $ 38,867 $ (377,681) $ 142,340
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.08) $ .01 $ (.08) $ .03
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (337,681) $ 142,340
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 453,911 174,961
Change in gas imbalance receivable
and deferred revenues (5,350) (3,582)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 80,322 124,200
Increase (decrease) in accounts payable 1,517 (107,533)
--------------- ---------------
Net cash provided by (used in) operating activities 192,719 330,386
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (23,465) (10,658)
Proceeds from sales of oil and gas properties 82,547 --
--------------- ---------------
Net cash provided by (used in) investing activities 59,082 (10,658)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (251,749) (319,681)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 52 47
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,649 1,566
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,701 $ 1,613
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1991-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 30, 1991, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 325 Interest Holders made total capital
contributions of $4,453,469.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the Interest Holders
and 15 percent to the general partners. After partnership payout,
continuing costs and revenues will be shared 75 percent by the Interest
Holders, and 25 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 30, 1991, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1991-C, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring nonoperating interests in producing oil and gas
properties. Under the terms of the NP/OR Agreement, the Partnership will
convey to the Pension Partnership a nonoperating interest in the
aggregate net profits (i.e., oil and gas sales net of related operating
costs) of the properties acquired equal to the Pension Partnership's
proportionate share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
INDEX
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 34,210 $ 110,328
Oil and gas sales receivable 160,070 217,520
Other 7,561 5,100
--------------- ----------------
Total Current Assets 201,841 332,948
--------------- ----------------
Gas Imbalance Receivable 144,674 157,041
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,881,396 4,967,181
Less-Accumulated depreciation, depletion
and amortization (4,060,814) (3,893,374)
--------------- ----------------
820,582 1,073,807
--------------- ----------------
$ 1,167,097 $ 1,563,796
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 57,397 $ 75,509
--------------- ----------------
Deferred Revenues 174,630 194,680
Interest Holders' Capital (4,639,621 Interest Holders' SDIs;
$1.00 per SDI) 914,200 1,255,347
General Partners' Capital 20,870 38,260
--------------- ----------------
Total Partners' Capital 935,070 1,293,607
--------------- ----------------
$ 1,167,097 $ 1,563,796
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 84,021 $ 142,134 $ 284,141 $ 540,762
Interest income 1,294 970 4,007 4,064
Other -- 1,399 2,882 6,340
--------------- --------------- --------------- ---------------
85,315 144,503 291,030 551,166
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 35,433 54,844 122,719 168,595
Production taxes 5,368 9,175 17,271 31,742
Depreciation, depletion
and amortization -
Normal 43,401 50,179 138,357 190,846
Additional 29,083 -- 29,083 --
General and administrative 15,972 17,092 54,087 62,399
--------------- --------------- --------------- ---------------
129,257 131,290 361,517 453,582
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (43,942) $ 13,213 $ (70,487) $ 97,584
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.01) $ -- $ (.02) $ .02
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (70,487) $ 97,584
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 167,440 190,846
Change in gas imbalance receivable
and deferred revenues (7,683) (5,179)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 57,450 42,006
(Increase) decrease in other current assets (2,461) (5,188)
Increase (decrease) in accounts payable (18,112) (3,393)
--------------- ---------------
Net cash provided by (used in) operating activities 126,147 316,676
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (22,392) (19,488)
Proceeds from sales of oil and gas properties 108,177 --
--------------- ---------------
Net cash provided by (used in) investing activities 85,785 (19,488)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (288,050) (416,857)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (76,118) (119,669)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 110,328 168,316
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34,210 $ 48,647
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited, except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1992-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1992, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 366 interest holders made total capital
contributions of $4,639,621.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective March 31, 1992, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1992-A, Ltd. ("Pension Partnership"),
an affiliated partnership managed by Swift for the purpose of acquiring
nonoperating interests in producing oil and gas properties. Under the
terms of the NP/OR Agreement, the Partnership will convey to the Pension
Partnership a nonoperating interest in the aggregate net profits (i.e.,
oil and gas sales net of related operating costs) of the properties
acquired equal to the Pension Partnership's proportionate share of the
property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,224 $ 51,891
Oil and gas sales receivable 63,992 143,153
--------------- ----------------
Total Current Assets 65,216 195,044
--------------- ----------------
Gas Imbalance Receivable 16,517 16,525
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,488,387 3,460,820
Less-Accumulated depreciation, depletion
and amortization (2,219,442) (1,784,011)
--------------- ----------------
1,268,945 1,676,809
--------------- ----------------
$ 1,350,678 $ 1,888,378
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 90,986 $ 40,921
--------------- ----------------
Deferred Revenues 17,983 17,983
Interest Holders' Capital (3,431,267 Interest Holders' SDIs;
$1.00 per SDI) 1,226,329 1,801,799
General Partners' Capital 15,380 27,675
--------------- ----------------
Total Partners' Capital 1,241,709 1,829,474
--------------- ----------------
$ 1,350,678 $ 1,888,378
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 56,241 $ 130,793 $ 186,091 $ 494,323
Interest income 16 185 224 1,048
Other 563 807 1,919 2,887
--------------- --------------- --------------- ---------------
56,820 131,785 188,234 498,258
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 33,054 28,766 96,883 100,082
Production taxes 2,408 7,228 7,723 23,635
Depreciation, depletion
and amortization -
Normal provision 36,263 52,686 117,416 184,315
Additional provision 295,282 -- 318,015 --
General and administrative 11,152 17,008 39,147 48,257
Interest expense 623 -- 623 --
--------------- --------------- --------------- ---------------
378,782 105,688 579,807 356,289
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (321,962) $ 26,097 $ (391,573) $ 141,969
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.09) $ .01 $ (.11) $ .04
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (391,573) $ 141,969
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 435,431 184,315
Change in gas imbalance receivable
and deferred revenues 8 (6)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 79,161 35,245
Increase (decrease) in accounts payable 50,065 (18,452)
--------------- ---------------
Net cash provided by (used in) operating activities 173,092 343,071
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (29,143) (108,101)
Proceeds from sales of oil and gas properties 1,576 --
--------------- ---------------
Net cash provided by (used in) investing activities (27,567) (108,101)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (196,192) (282,016)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (50,667) (47,046)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 51,891 70,301
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,224 $ 23,255
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 623 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1992-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 28, 1992, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 290 interest holders made total capital
contributions of $3,431,267.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 28, 1992, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1992-D, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring interests in producing oil and gas properties.
Under the terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership a nonoperating interest in the aggregate net
profits (i.e., oil and gas sales net of related operating costs) of the
properties acquired equal to the Pension Partnership's proportionate
share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- Septemer 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended Septemer 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended Septemer 30,1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,041 $ 3,334
Oil and gas sales receivable 87,458 222,953
--------------- ----------------
Total Current Assets 88,499 226,287
--------------- ----------------
Gas Imbalance Receivable 20,675 20,677
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,769,603 4,646,076
Less-Accumulated depreciation, depletion
and amortization (2,930,914) (2,258,584)
--------------- ----------------
1,838,689 2,387,492
--------------- ----------------
$ 1,947,863 $ 2,634,456
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 242,740 $ 74,703
--------------- ----------------
Deferred Revenues 24,984 24,984
Interest Holders' Capital (4,384,150 Interest Holders' SDIs;
$1.00 per SDI) 1,627,351 2,463,364
General Partners' Capital 52,788 71,405
--------------- ----------------
Total Partners' Capital 1,680,139 2,534,769
--------------- ----------------
$ 1,947,863 $ 2,634,456
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 76,365 $ 206,441 $ 268,875 $ 707,924
Interest income 14 18 41 40
Other 570 759 1,987 2,724
--------------- --------------- --------------- ---------------
76,949 207,218 270,903 710,688
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 45,935 48,728 138,647 161,557
Production taxes 3,213 13,091 11,564 36,371
Depreciation, depletion
and amortization -
Normal provision 52,226 81,311 174,978 260,214
Additional provision 409,284 -- 497,352 --
General and administrative 13,761 22,451 49,527 63,167
Interest expense 3,392 -- 4,524 --
--------------- --------------- --------------- ---------------
527,811 165,581 876,592 521,309
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (450,862) $ 41,637 $ (605,689) $ 189,379
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.10) $ .01 $ (.14) $ .04
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (605,689) $ 187,379
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 672,330 260,214
Change in gas imbalance receivable
and deferred revenues 2 (2)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 135,495 49,651
Increase (decrease) in accounts payable 168,037 (20,072)
--------------- ---------------
Net cash provided by (used in) operating activities 370,175 479,170
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (124,192) (158,501)
Proceeds from sales of oil and gas properties 665 --
--------------- ---------------
Net cash provided by (used in) investing activities (123,527) (158,501)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (248,941) (320,629)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,293) 40
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,334 1,319
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,041 $ 1,359
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 4,524 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1993, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 333 interest holders made total capital
contributions of $4,384,150.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
Septemer 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective March 31, 1993, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1993-A, Ltd. ("Pension Partnership"),
an affiliated partnership managed by Swift for the purpose of acquiring
interests in producing oil and gas properties. Under the terms of the
NP/OR Agreement, the Partnership has conveyed to the Pension Partnership
a nonoperating interest in the aggregate net profits (i.e., oil and gas
sales net of related operating costs) of the properties acquired equal
to the Pension Partnership's proportionate share of the property
acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,366 $ 108,137
Oil and gas sales receivable 100,422 306,015
--------------- ----------------
Total Current Assets 101,788 414,152
--------------- ----------------
Gas Imbalance Receivable 18,823 18,839
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,885,313 5,800,890
Less-Accumulated depreciation, depletion
and amortization (4,291,089) (3,432,630)
--------------- ----------------
1,594,224 2,368,260
--------------- ----------------
$ 1,714,835 $ 2,801,251
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 120,112 $ 104,625
--------------- ----------------
Deferred Revenues 18,247 18,247
Interest Holders' Capital (5,810,456 Interest Holders' SDIs;
$1.00 per SDI) 1,571,377 2,652,469
General Partners' Capital 5,099 25,910
--------------- ----------------
Total Partners' Capital 1,576,476 2,678,379
--------------- ----------------
$ 1,714,835 $ 2,801,251
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 90,199 $ 236,427 $ 305,835 $ 766,908
Interest income -- 424 1,258 2,645
Other income 1,357 1,903 4,644 6,594
--------------- --------------- --------------- ---------------
91,556 238,754 311,737 776,147
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease Operating 57,669 66,991 163,430 190,877
Production taxes 4,549 15,449 15,504 42,318
Depreciation, depletion
and amortization -
Normal provision 56,549 102,265 193,657 320,531
Additional provision 334,036 -- 664,802 --
General and administrative 19,205 24,369 64,947 73,310
Interest expense 447 -- 447 --
--------------- --------------- --------------- ---------------
472,455 209,074 1,102,787 627,036
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (380,899) $ 29,680 $ (791,050) $ 149,111
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.07) $ .01 $ (.14) $ .03
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (791,050) $ 149,111
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 858,459 320,531
Change in gas imbalance receivable
and deferred revenues 16 (12)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 205,593 24,364
Increase (decrease) in accounts payable 15,487 (15,368)
--------------- ---------------
Net cash provided by (used in) operating activities 288,505 478,626
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (87,629) (128,607)
Proceeds from sales of oil and gas properties 3,206 --
--------------- ---------------
Net cash provided by (used in) investing activities (84,423) (128,607)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (310,853) (454,453)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (106,771) (104,434)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 108,137 171,415
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,366 $ 66,981
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 447 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1993, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 434 interest holders made total capital
contributions of $5,810,456.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective September 30, 1993, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1993-C, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring interests in producing oil and gas properties.
Under the terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership a nonoperating interest in the aggregate net
profits (i.e., oil and gas sales net of related operating costs) of the
properties acquired equal to the Pension Partnership's proportionate
share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month period ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,426 $ 1,383
Oil and gas sales receivable 103,574 211,490
--------------- ----------------
Total Current Assets 105,000 212,873
--------------- ----------------
Gas Imbalance Receivable 8,594 8,594
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,744,343 5,611,347
Less-Accumulated depreciation, depletion
and amortization (4,116,148) (3,384,516)
--------------- ----------------
1,628,195 2,226,831
--------------- ----------------
$ 1,741,789 $ 2,448,298
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 276,181 $ 99,439
--------------- ----------------
Deferred Revenues 20,532 20,532
Interest Holders' Capital (5,324,435 Interest Holders' SDIs;
$1.00 per SDI) 1,405,590 2,265,961
General Partners' Capital 39,486 62,366
--------------- ----------------
Total Partners' Capital 1,445,076 2,328,327
--------------- ----------------
$ 1,741,789 $ 2,448,298
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 94,174 $ 232,972 $ 353,271 $ 732,487
Interest income 19 17 43 40
Other income 659 941 2,405 3,339
--------------- --------------- --------------- ---------------
94,852 233,930 355,719 735,866
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease Operating 56,436 60,290 155,835 187,872
Production taxes 5,340 15,874 21,025 44,637
Depreciation, depletion
and amortization -
Normal provision 64,284 106,355 224,215 309,345
Additional provision 302,315 -- 507,417 --
General and administrative 20,409 22,031 65,858 67,925
Interest expense 3,584 588 4,731 1,051
--------------- --------------- --------------- ---------------
452,368 205,138 979,081 610,830
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (357,516) $ 28,792 $ (623,362) $ 125,036
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.07) $ .01 $ (.12) $ .02
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (623,362) $ 125,036
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 731,632 309,345
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 107,916 34,507
Increase (decrease) in accounts payable 176,742 (33,823)
--------------- ---------------
Net cash provided by (used in) operating activities 392,928 435,065
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (133,729) (93,887)
Proceeds from sales of oil and gas properties 733 --
--------------- ---------------
Net cash provided by (used in) investing activities (132,996) (93,887)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (259,889) (341,138)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 43 40
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,383 1,313
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,426 $ 1,353
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 4,731 $ 1,052
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1993, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 406 interest holders made total capital
contributions of $5,324,435.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 31, 1993, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1993-D, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring interests in producing oil and gas properties.
Under the terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership a nonoperating interest in the aggregate net
profits (i.e., oil and gas sales net of related operating costs) of the
properties acquired equal to the Pension Partnership's proportionate
share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month period ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,302 $ 1,263
Oil and gas sales receivable 123,187 195,628
--------------- ----------------
Total Current Assets 124,489 196,891
--------------- ----------------
Gas Imbalance Receivable 1,648 1,648
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,114,126 4,773,434
Less-Accumulated depreciation, depletion
and amortization (3,629,934) (2,145,143)
--------------- ----------------
1,484,192 2,628,291
--------------- ----------------
$ 1,610,329 $ 2,826,830
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 555,370 $ 182,928
--------------- ----------------
Deferred Revenues 7,137 7,137
Interest Holders' Capital (4,487,431 Interest Holders' SDIs;
$1.00 per SDI) 1,017,047 2,596,493
General Partners' Capital 30,775 40,272
--------------- ----------------
Total Partners' Capital 1,047,822 2,636,765
--------------- ----------------
$ 1,610,329 $ 2,826,830
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 113,015 $ 202,057 $ 374,635 $ 597,002
Interest income 17 16 40 36
Other income 791 986 2,742 3,234
--------------- --------------- --------------- ---------------
113,823 203,059 377,417 600,272
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease Operating 64,246 50,967 169,469 193,840
Production taxes 6,321 11,647 22,034 34,892
Depreciation, depletion
and amortization -
Normal provision 50,417 75,725 169,658 205,322
Additional provision 641,728 -- 1,315,133 192,153
General and administrative 13,806 15,695 51,375 58,877
Interest expense 9,626 696 14,411 1,128
--------------- --------------- --------------- ---------------
786,144 154,730 1,742,080 686,212
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (672,321) $ 48,329 $ (1,364,663) $ (85,940)
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.15) $ .01 $ (.30) $ (.02)
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (1,364,663) $ (85,940)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 1,484,791 397,475
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 72,441 40,646
Increase (decrease) in accounts payable 372,442 46,934
--------------- ---------------
Net cash provided by (used in) operating activities 565,011 399,115
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (340,833) (47,263)
Proceeds from sales of oil and gas properties 141 --
--------------- ---------------
Net cash provided by (used in) investing activities (340,692) (47,263)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (224,280) (351,816)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 39 36
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,263 1,199
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,302 $ 1,235
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 14,411 $ 1,129
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on April 20, 1994, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 331 interest holders made total capital
contributions of $4,487,431.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective April 20, 1994, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1994-A, Ltd. ("Pension Partnership"),
an affiliated partnership managed by Swift for the purpose of acquiring
interests in producing oil and gas properties. Under the terms of the
NP/OR Agreement, the Partnership has conveyed to the Pension Partnership
a nonoperating interest in the aggregate net profits (i.e., oil and gas
sales net of related operating costs) of the properties acquired equal
to the Pension Partnership's proportionate share of the property
acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,316 $ 1,276
Oil and gas sales receivable 169,327 270,176
--------------- ----------------
Total Current Assets 170,643 271,452
--------------- ----------------
Gas Imbalance Receivable 2,607 2,607
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 6,360,916 5,954,955
Less-Accumulated depreciation, depletion
and amortization (4,237,072) (2,624,675)
--------------- ----------------
2,123,844 3,330,280
--------------- ----------------
$ 2,297,094 $ 3,604,339
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 681,422 $ 255,568
--------------- ----------------
Deferred Revenues 7,042 7,042
Interest Holders' Capital (5,698,300 Interest Holders' SDIs;
$1.00 per SDI) 1,565,119 3,284,397
General Partners' Capital 43,511 57,332
--------------- ----------------
Total Partners' Capital 1,608,630 3,341,729
--------------- ----------------
$ 2,297,094 $ 3,604,339
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 156,600 $ 277,024 $ 510,764 $ 807,332
Interest income 17 16 40 37
Other income 1,251 1,548 4,337 4,839
--------------- --------------- --------------- ---------------
157,868 278,588 515,141 812,208
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease Operating 83,265 67,301 217,394 253,796
Production taxes 9,027 16,190 30,719 47,382
Depreciation, depletion
and amortization -
Normal 76,116 113,182 253,823 297,427
Additional 656,200 -- 1,358,574 --
General and administrative 17,303 21,031 64,900 76,072
Interest expense 11,486 1,248 17,728 2,289
--------------- --------------- --------------- ---------------
853,397 218,952 1,943,138 676,966
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (695,529) $ 59,636 $ (1,427,997) $ 135,242
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.12) $ .01 $ (.25) $ .02
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (1,427,997) $ 135,242
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 1,612,397 297,427
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 100,849 55,363
Increase (decrease) in accounts payable 425,854 69,098
--------------- ---------------
Net cash provided by (used in) operating activities 711,103 557,130
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (406,183) (66,817)
Proceeds from sales of oil and gas properties 222 --
--------------- ---------------
Net cash provided by (used in) investing activities (405,961) (66,817)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (305,102) (490,277)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 40 36
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,276 1,212
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,316 $ 1,248
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 17,728 $ 2,289
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-B, Ltd., a Texas limited
partnership ('the Partnership"), was formed on September 30, 1994, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 354 interest holders made total capital
contributions of $5,698,300.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective September 30, 1994, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1994-b, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring interests in producing oil and gas properties.
Under the terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership a nonoperating interest in the aggregate net
profits (i.e., oil and gas sales net of related operating costs) of the
properties acquired equal to the Pension Partnership's proportionate
share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month period ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,128 $ 28,762
Oil and gas sales receivable 132,653 185,051
--------------- ----------------
Total Current Assets 133,781 213,813
--------------- ----------------
Gas Imbalance Receivable 397 397
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,795,417 5,257,507
Less-Accumulated depreciation, depletion
and amortization (4,282,853) (1,972,763)
--------------- ----------------
1,512,564 3,284,744
--------------- ----------------
$ 1,646,742 $ 3,498,954
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 776,789 $ 118,816
--------------- ----------------
Deferred Revenues 9,988 9,988
Interest Holders' Capital (5,125,411 Interest Holders' SDIs;
$100 per SDI) 820,977 3,324,611
General Partners' Capital 38,988 45,539
--------------- ----------------
Total Partners' Capital 859,965 3,370,150
--------------- ----------------
$ 1,646,742 $ 3,498,954
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 116,280 $ 200,890 $ 393,269 $ 598,354
Interest income 15 430 128 3,823
Other income 1,590 1,489 4,857 5,519
--------------- --------------- --------------- ---------------
117,885 202,809 398,254 607,696
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease Operating 87,687 64,455 230,408 239,913
Production taxes 4,681 10,123 18,078 29,762
Depreciation, depletion
and amortization -
Normal provision 39,020 47,017 122,593 141,399
Additional provision 1,375,013 -- 2,187,497 909,854
General and administrative 14,793 14,873 57,513 68,661
Interest expense 14,107 -- 19,484 --
--------------- --------------- --------------- ---------------
1,535,301 136,468 2,635,573 1,389,589
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (1,417,416) $ 66,341 $ (2,237,319) $ (781,893)
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.28) $ .01 $ (.44) $ (.15)
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (2,237,319) $ (781,893)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 2,310,090 1,051,253
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 52,398 66,077
Increase (decrease) in accounts payable 657,973 26,290
--------------- ---------------
Net cash provided by (used in) operating activities 783,142 361,727
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (573,944) (40,959)
Proceeds from sales of oil and gas properties 34 --
--------------- ---------------
Net cash provided by (used in) investing activities (537,910) (40,959)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (272,866) (478,700)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,634) (157,932)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,762 210,403
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,128 $ 52,471
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 19,484 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1994, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 364 interest holders made total capital
contributions of $5,125,411.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective September 30, 1994, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1994-C, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring interests in producing oil and gas properties.
Under the terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership a nonoperating interest in the aggregate net
profits (i.e., oil and gas sales net of related operating costs) of the
properties acquired equal to the Pension Partnership's proportionate
share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
Financial Statements:
<S> <C>
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,000 $ 393,495
Oil and gas sales receivable 132,484 204,187
--------------- ----------------
Total Current Assets 133,484 597,682
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,981,425 4,546,962
Less-Accumulated depreciation, depletion
and amortization (3,556,340) (1,527,279)
--------------- ----------------
1,425,085 3,019,683
--------------- ----------------
$ 1,558,569 $ 3,617,365
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 272,171 $ 87,057
--------------- ----------------
Deferred Revenues 8,093 8,093
Interest Holders' Capital (4,775,604 Interest Holders' SDIs;
$1.00 per SDI) 1,245,031 3,477,005
General Partners' Capital 33,274 45,210
--------------- ----------------
Total Partners' Capital 1,278,305 3,522,215
--------------- ----------------
$ 1,558,569 $ 3,617,365
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 116,209 $ 185,786 $ 384,094 $ 650,892
Interest income 410 4,969 7,910 15,883
Other income 1,320 1,192 3,962 4,550
--------------- --------------- --------------- ---------------
117,939 191,947 395,966 671,325
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Lease Operating 72,368 51,939 191,096 193,410
Production taxes 4,405 9,038 14,399 23,994
Depreciation, depletion
and amortization -
Normal provision 42,496 45,479 127,177 160,638
Additional provision 1,345,801 -- 1,901,884 768,909
General and administrative 13,929 20,177 54,443 74,121
Interest expense 3,308 -- 3,308 --
--------------- --------------- --------------- ---------------
1,482,307 126,633 2,292,307 1,221,072
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (1,364,368) $ 65,314 $ (1,896,341) $ (549,747)
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ (.29) $ .01 $ (.40) $ (.12)
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (1,896,341) $ (549,747)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 2,029,061 929,547
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 71,703 65,595
Increase (decrease) in accounts payable 185,114 9,355
--------------- ---------------
Net cash provided by (used in) operating activities 389,537 454,750
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (434,463) (32,836)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (347,569) (519,111)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (392,495) (97,197)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 393,495 485,796
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,000 $ 388,599
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,308 $ --
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 30, 1994, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 321 Interest Holders made total capital
contributions of $4,775,604.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the Interest Holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the nine months ended
September 30, 1998 and 1997.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 30, 1994, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1994-D, Ltd. ("Pension
Partnership"), an affiliated partnership managed by Swift for the
purpose of acquiring nonoperating interests in producing oil and gas
properties. Under the terms of the NP/OR Agreement, the Partnership will
convey to the Pension Partnership a nonoperating interest in the
aggregate net profits (i.e., oil and gas sales net of related operating
costs) of the properties acquired equal to the Pension Partnership's
proportionate share of the property acquisition costs.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership
extends credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(7) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(8) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 24, 1998
Swift Energy Company
By:--------------------------------
Name: John R. Alden
Title: Senior Vice President
